The first of $349 billion in “forgivable” loans began pumping up the depleted bank accounts of small businesses Thursday, as lenders got the OK from the Small Business Administration to make payments as part of the coronavirus economic relief package enacted last month.
“Today was the first day," Vernon Hill, executive chairman of Philadelphia-based Republic Bank, said in confirming that, after a slow start, money was now flowing under the Paycheck Protection Program. "We checked the applications, we sent them to SBA to get case numbers, and as soon as they gave us the numbers we signed the checks.”
Republic Bank had so far approved 1,500 applications from past customers and new ones, including “very small to midsized businesses, nonprofits, medical practices, restaurants, all types,” Hill said.
Only a minority of the approved borrowers had received their checks, but Hill said that number should rise fast, now that SBA has streamlined the process and the Federal Reserve has set up a cheap source of funding.
The checks could mark a turning point in efforts to rescue small businesses from the economic carnage wrought by the coronavirus.
So far, the results have been bizarre, hopeful, and uneven, with some successes and more horror stories. Larger companies appear to be getting loans approved first, based on interviews with local entrepreneurs.
There are at least two ways businesses can get emergency funds through the SBA. Congress told the agency to give grants of up to $10,000 to businesses within days of their application through the SBA’s Economic Injury Disaster Loan program (EIDL). The grants are administered directly by the SBA.
The other way is through the $349 billion Paycheck Protection Program (PPP), which is given through banks and is designed to be forgiven if the borrower keeps its staff employed.
Businesses and nonprofits are applying for PPP loans of up to $10 million. Wells Fargo, which has the most local accounts of any bank in Philadelphia, wasn’t taking more PPP applications until the bank and the Federal Reserve agreed to ease those restrictions temporarily this week.
Some in the Philadelphia area like Julie Foster, owner of Tired Hands Brewery in Ardmore, applied for and received confirmation of an EIDL grant.
But after applying in late March, she still didn’t have the cash in hand.
“We have not heard a response from the SBA," she said Thursday. "We submitted the SBA $10,000 advance application on April 1, and have not received any updates at all. Our understanding is that it was supposed to be a 3-day turnaround, but it has been over a week without any information.”
Foster credited her bankers for also applying for the much larger PPP.
“We are very lucky to be a customer of Citizens Bank," she said. “While they waited until Monday [April 6] to roll out the PPP loan applications, they did not limit applications.”
PPP loans will be forgiven if used for payroll, rents, utilities, and debt service.
Here’s a sample of other business owners and their experiences applying for SBA loans.
Patricia Wellenbach, Please Touch Museum president & CEO
The board of the popular kids’ museum in Fairmount Park has been meeting remotely every two weeks since early March to make what president Wellenbach calls “gut-wrenching decisions about our beloved museum and our employees.”
On Wednesday, as directors — including several Philadelphia bank officers — popped up on her Zoom screen, Wellenbach had some good news: New York-based Emigrant Bank had agreed to a forgivable PPP loan of $718,000 as she seeks to keep key staff working through the museum’s closure
As of Thursday, the money still hadn’t arrived, but Wellenbach had her approval in hand, and was confident.
She credited a group of lawyers specializing in PPP loans at Dilworth Paxson LP, convened by firm chairman Ajay Raju, who said he expected clients would need lots of help navigating government programs if they were to raise the cash approved by Congress. In a note to Raju, Wellenbach was deeply grateful: “Not all heroes wear capes,” she wrote.
Raju said his team pored over details of the new stimulus law and worked closely with Emigrant to assure the bank of what payroll records and other requirements it would need to approve loans like the one to Please Touch. “It is confusing to many people," he said. "Professional assurance really seems to help get these done in a timely way.”
Lance Bachmann, 1SEO cofounder
As of Wednesday, 1SEO’s Lance Bachmann was successfully approved for a PPP loan through Centric Bank, headquartered in Harrisburg.
“I worked day and night with my CFO and my accounting firm Zinman & Co. and we heard that we were approved” after applying about a week earlier, he said.
“I got approved and it’s possible that it’s because my company has been around for years,” he said, adding that bankers are “telling me there’s a lot of fraud out there,” which may account for the foot-dragging.
“This made my relationship with my bank better," Bachmann said. "I have a better opinion of bankers now than before. I’m bringing back the 10 people we laid off.”
Why haven’t more companies gotten approved?
“The bank is getting 5% in fees," he said. "So they’re starting with the largest amounts and working their way down.
Banks do receive a 5% fee but only on loans below $350,000; for loans up to $2 million the fee totals 3%, and above $2 million it’s a 1% fee.
Janice Leone, Corporate Interiors
The SBA approved Corporate Interiors’ loan application through Oceans First Bank.
“They approved our loan and provided our financial institution with the [PPP] loan number” on Wednesday, after a week, Leone said.
According to Corporate Interiors CFO Patricia Rauch, the company worked with its accounting firm CliftonLarsonAllen and the bank to get a loan for its 179 employees’ paychecks and other expenses.
“There were shifting definitions of what was the right amount, because the stimulus package initially wasn’t clear” on who counted as full time employees, Rauch said.
Leone leads Corporate Interiors, a $75 million-in-revenue company in Wayne, and has been busy supplying local hospitals, nursing homes, and other medical facilities with retrofitted beds, exam tables, and office furniture and equipment. “The company is busier than ever,” Leone said.
Micah Bertin, Micah’s Printing
“While I believe the basic intentions and dedication of many of the people trying to make this work is admirable, they are in over their heads and the weeks of denial, and the lack of preparation is showing,” said Berwyn print shop owner Micah Bertin.
Bertin has completed the updated “streamlined application” for the PPP loan. “It was very easy, user-friendly and took less than 10 minutes, and once completed it took me to a screen with my application number,” he said.
But still no money.
“Another very confusing statement is that funds will be made available within three days of a successful application,” Bertin said. “Today is day 4 for me, so I was getting very concerned. I called their help line ... 800-659-2955, actually got through to a live person within about five minutes. She ... explained to me that it takes two to three weeks to review and process the application. If and when it’s approved, the money is then disbursed within three days.”
He was confused by the timeline. “I and perhaps many others would interpret ‘successful application’ as meaning the application went through, was successfully submitted and I have an application number," he said. "They should make it crystal clear that the review process takes weeks.”
Dave Evasew, Upper Merion Dance & Gymnastics
Dave Evasaw is hoping for a cash advance on his EIDL application. But he got a different story on the phone with the SBA.
An agency supervisor “told me that the SBA gets to choose the amount of the advance," Evasaw said. "I pointed out that Page 68 of the law. He said that the SBA is choosing the amount. I said regardless of the fact that the new procedures rate $1,000 per employee, I would be eligible for the full $10,000 because I have 15 full-time employees and 50 part-time employees. He said that the SBA would determine what I get for an advance, if we get one, which again is also contrary to the law as the law says even denied loan applications are eligible for the advance.”
He is resorting to paying for expenses on credit cards.
“We lost over $200,000 since we were one of the first companies to have to close, being a gym in Montgomery County, Pa.," he said. "We are down to just gift cards to eat with as we’ve put every penny of cash and personal credit cards into our business’ payroll, health insurance, and other essential bills.”
As for the $10,000 advance as part of the loan application?
“We can expect it in 3-to-4 weeks, if they find my application," he said. “The SBA has changed the laws at their own discretion to the detriment of small businesses everywhere. Many banks can’t access it because they have to manually enter a full year’s worth of payroll data into the system and the government hasn’t given out enough portal accounts to the banks to accomplish it at any scale.”
Heather Consalvi, AmRes Lending, Oaklyn, N.J.
“I am doing this for my husband’s small business in Oaklyn and the basics of even getting information is completely blocked,” Heather Consalvi said.
“People will start to get crazy if you cannot even give them the courtesy of an update, some way of seeing, ‘yes, I have the application and yes, it will come eventually,’” she said.
Trisha Stewart, salon owner, Barbarella Beauty
“I’ve called the SBA almost every day and they now just say they are unable to give any information on the status of the loan,” Stewart said Wednesday.
“They were taking [loan applicants] in order of when you applied but not sure anyone there knows what is actually going on," she said. "They are reaching out in 7-10 business days. Tomorrow will be 10 business days for me after filling out the streamlined application. It’s the great American hoax.”
How long can businesses hold out?
In a weekend snap survey of the Business for Responsible Tax Reform’s small business network, 21% of the more than 500 respondents said they can wait only a week or less for a loan to arrive before their business fails. A full 75% said they can wait for a month or less before their business fails.
In response to the delays, Sen. Pat Toomey (R., Pa.) sent a letter to the U.S. Treasury on Wednesday “to relay these concerns and ask how the Treasury Department and SBA will resolve them.”
“Pennsylvania lenders have experienced repeated difficulties with SBA technology platforms," Toomey wrote. "Existing SBA lenders have struggled to reactivate their SBA lender accounts and add new users.”
New lenders report that “registering under PPP seems to be unworkable. Lenders have also not been able to access the Amazon Web Services (AWS) platform for processing non-SBA lender PPP loans. Finally, lenders lack clarity about how long the SBA PPP funding will last, which is creating unnecessary uncertainty for borrowers and lenders.”